1. Warmup
Frank and Lucia have an adjusted gross income of $124,498. They are looking at a new house. Their monthly mortgage payment would be $1, Their annual property taxes would be $2,950, and their annual homeowner’s premium would be $1,121.
What is their front-end ratio?
If they also had a car loan with a monthly payment of $375.41, what is their back-end ratio?

2. Learning Targets 8-4 PURCHASE A HOME Estimate closing costs.
Banking
5/21/2019
8-4 PURCHASE A HOME
Learning Targets
Estimate closing costs.
Create an amortization table for a fixed rate mortgage.
Chapter 1

3. Key Terms earnest money deposit closing costs attorney fee
origination fee
title search
Points
prepaid interest

4. Example 1
Leah and Josh are buying a $600,000 home. They have been approved for a 7.25% APR mortgage. They made a 15% down payment and will be closing on September 6th. How much should they expect to pay in prepaid interest at the closing?

5. CHECK YOUR UNDERSTANDING
How much will be charged in prepaid interest on a $400,000 loan with an APR of 6% that was closed on December 17?

6. Closing costs – As a rule-of-thumb, closing costs range from 2% to 7% of the purchase price.
Example 2
Leah and Josh know that they will have to bring their checkbook to the closing. What might they expect to pay in total at the closing?

7. CHECK YOUR UNDERSTANDING
Shannon had to make a down payment of 15% of the selling price of her house. She was approved for a $340,000 mortgage. What range of costs might she expect to pay at the closing?

8. EXAMPLE 3
Trudy and Tom have been approved for a $300,000, 15-year mortgage with an APR of 5.75%. How much of their first monthly payment will go to interest and principal?

9. CHECK YOUR UNDERSTANDING
How much of the second month’s payment will go to interest and principal?

10. EXAMPLE 4
How can Trudy and Tom get an accounting of where their monthly payments will go for the first year of their mortgage?
Download the spreadsheet from nicolohs.weebly.com
Open the spreadsheet in Excel

11. CHECK YOUR UNDERSTANDING
Adding a sum cell to the bottom of the monthly payment, towards interest, and towards principal columns yields the following totals at the end of the first year of payments.
Payments for 12 Months: $29,894.76
Interest for 12 Months: $16,911.38
Principal for 12 Months: $12,983.39
At the end of the 12-month period, what percent of the principal has been paid off?